Oil and gas sector facing S$1b bond redemptions by next year
With about S$1 billion in Singapore oil-and-gas bonds due by
next year, fears are building that Swiber's collapse will trigger a domino
effect on its peers.
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Jamie Lee
04 August 2016
With about S$1 billion in Singapore oil-and-gas bonds due by next year, fears are building that Swiber's collapse will trigger a domino effect on its peers.
An OCBC Investment Research report also pointed out that with the bond markets shut to offshore marine issuers, there are questions over how these issues will be refinanced. The total bonds maturing this year and the next come up to S$970 million for Singapore-listed oil-and-gas firms, the report showed.
"With bond markets remaining largely closed to offshore marine issuers - there were no new bond issues from the sector in the first half of 2016 - it could be challenging for some of the issuers to refinance their bonds," OCBC said in its report.
Swiber Holdings has been dominating the news in the past week or so after it was forced into judicial management by an unmanageable debt pile, vanishing cash flow and when a US$200 million equity injection fell through. The company entered into JM after it was prompted by its major bank DBS to rescind its winding-up petition. KPMG has since been appointed interim JM for Swiber.
CIMB Research said: "We think more defaults in the oil-and-gas sector are bound to happen if exploration and production activities remain suppressed, but it will likely be a 2017, 2018 story as most bonds are due then."
Ausgroup, whose main banker is DBS, is now in discussions with bondholders due to a breach of covenants. The debt is worth S$87 million and due October 2016. But even though Ausgroup had net debt of A$157 million as at March 2016, the exposure is likely to be manageable for DBS as the loans are secured by cash and property, it added.
Swiber has already defaulted on a coupon payment on a S$150 million junk bond due 2018.
BT earlier reported that Swiber could have US$297.7 million of trade payables as at March 31, 2016. The bank also confirmed DBS had provided a bridging loan to be repaid once the equity injection came through. This refers to the expected US$200 million preference share subscription from a private equity group, AMTC. The bridging loan is understood to have gone towards the recent redemption of two bond issues, worth S$205 million in total. But the AMTC deal fell through.
Ezra Holdings, which has been on investors' radar since news broke of Swiber's initial winding-up move, has been divesting its assets. The earliest maturity date for its bonds is in 2018, so there is still some breathing space for the company, OCBC said.
The auditors of KS Energy and RH Petrogas have raised concerns, and KS Energy is now looking for buyers for its distribution business.
Meanwhile, Nam Cheong has not received new orders for close to two years. "Bank support is critical going forward," said the brokerage.
Singapore banks' loans to the offshore support services sector is at 2-3 per cent of total lending.
OCBC recognised new non-performing assets (NPAs) of about S$370 million for oil-and-gas exposure in the second quarter, while UOB saw the bulk of its S$802 million new NPAs from the sector.
"We would not be surprised to see a similar trend at DBS with further weakness in the sector," CIMB said.